2015

Mindy Herzfeld discusses a recentwTO ruling striking down a number of measures that Argentina enacted to shore up its tax base, and explainswhy tax administrators need to be mindful of potential conflicts between tax and trade ruleswhen enacting new tax laws.
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A group of UN tax experts have achieved modest progress toward clarifying an array of thorny and emerging tax policies that confront theworld's developing nations.
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The chances that 11 European Union member stateswill agree on a financial transactions tax by December are fading.
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The sweet, earthy aroma from the brewery here is inescapable. The Stella Artois logos are hard to miss at the sprawling factory near the headquarters of the company,which employs thousands ofworkers across the country.

For Belgium, the global beer giant Anheuser-Busch InBev is a corporate champion, a source of homegrown pride and the country's largest company by market value. But its clout,whichwill only growwith the company's $104 billion deal to buy SABMiller, is also the source of scrutiny.

As a dominant player in Belgium, the company has enjoyed accommodations from the government that allow it to significantly lower its tax bills.

The friendly tax arrangement is part of a pattern that small countries like Belgium use towoo multinationals. Such deals are increasingly coming under fire, and the European Union's competition commissioner is investigatingwhether some of them amount to illegal state aid.
For the New York Times story, go here.

The European Union said itwill require Starbucks Corp. and Fiat Chrysler Automobiles NV to pay tens of millions of euros in back taxes after ruling that the companies benefited from illegal tax deals, in an unprecedented decision that risks overturning thousands of corporate tax structures across Europe.
For thewall Street Journal story, go here.

Bill Ings (pseudonym) contends that the new base erosion and profit-shifting permanent establishment rules may be hard to implement, because in most cases, identifying the personwho recommended the contract can be difficult.
For the Tax Notes letter, go here. :(subscription required)

Tax directors of international companies say that the United States and some other countries are becoming more aggressive in pursuing and litigating transfer pricing cases, and the companies' responses range from the logical to the almost ludicrous.
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John Merrick, special counsel to the IRS associate chief counsel (international), indicated October 22 that the use of some so-called Up-C structures in transactions facilitating the movement of U.S. corporations offshore raises policy concerns for the government under section 367.
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In news analysis, Lee A. Sheppard looks at a discussion from the recent International Bar Association meeting in Vienna that focused on BEPS topics of interest to private equity -- interest deductions, permanent establishment, and treaty benefits.
For the Tax Notes article, go here. (subscription required)

Proposals to tighten key aspects of Britain's business-friendly tax regime ÔøΩ the treatment of interest and patents ÔøΩwere put forward by the Treasury on Thursday.

But the government insisted it had notweakened its commitment to creating one of theworld's most competitive corporate tax systems in spite of the plans to implement a global crackdown on avoidance.
For the Financial Times story, go here.

Starbucks and Fiat took the heat onwednesday. Now thousands of other multinationals doing business in Europe are asking a similar question:will they, too, be caught up in a far-reaching Brussels crackdown on tax avoidance?

Muchwill depend on Margrethe Vestager, the EU's competition commissioner,who onwednesday declared that the companies' highly-advantageous tax agreementswith the Netherlands and Luxembourg, respectively, amounted to illegal forms of state aid.


For the Financial times story, go here.

The Treasury has brushed off criticism from US multinationals of its new tax on "diverted profits" as it steps up its efforts to promote the UK's tax system to foreign investors.

David Gauke, Treasury minister, said just one out of 60 companies he met on a US tour said the 25 per cent levy on profits artificially shifted out of the UK had made it think again about investing in Britain. He said: "Of course not everyone is happy . . . but itwas very rare to find anyonewho said the UK is now unattractive to us."
For the Financial Times story, go here.

Richard Collier comments on the OECD's final base erosion and profit-shifting project report on permanent establishment status, highlighting areas he believes need further guidance.
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Isolated changes to the international tax system may be insufficient to prevent base erosion and profit shifting, and an EU standard of international tax secrecy is needed to balance the interest of the publicwith the protection of taxpayers, according to studies commissioned by a European Parliament special committee.
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Irish officials are confident that Irelandwill be compliantwith the standards set by the OECD's final base erosion and profit-shifting recommendations.
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Mindy Herzfeld reports on action 7 of the OECD's base erosion and profit-shifting project,which she says develops new permanent establishment standardswithout taking into account the realities inwhich most cross-border business is undertaken.
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On October 14, 2015 Luxembourg released bill 6900 (the Budget Bill) and bill 6891 (the Tax Measures Bill).

If approved by Parliament, these measureswould amend the existing Luxembourg netwealth tax, repeal the Luxembourg intellectual property (IP) regimewith a transitional period, and modify the country's existing corporate and individual tax rules.
For the PwC Insight, go here.

It's hard to disagreewith Margrethe Vestagerwhen she says that "all companies, big or small, multinational or not, should pay their fair share of tax." It's also hard to see howwhat she announced onwednesdaywill make the system any fairer.
For the Bloomberg editorial, go here.

Congress needs to lower the corporate tax rate from its current 35% to discourage U.S. insurers from moving offshore, according to the head of Travelers Cos. Inc.
For the Business Insurance story, go here.

On September 8 2015 the Mexican President, Enrique Peña Nieto, submitted the 2016 tax reform package for approval to Congress. Should Congress approve the package, itwould come into force on January 1 2016.
For the ITR story, go here.

On October 5, 2015, the Organisation for Economic Co-operation and Development (OECD) released its deliverable on Base Erosion and Profit Shifting (BEPS) Action 14: 2015 Final Report, Making Dispute Resolution Mechanisms More Effective (the "Report"). According to the Report, countrieswill commit to develop a minimum standard in the context of treaty-related disputes andwill ensure effective and efficient implementation of this standard through the establishment of a peer-based monitoring process.

For the PwC Insight, go here.

Luxembourg and the Netherlands lost a bit of luster as tax havens for some of theworld's biggest companies as the European Union fired its latest salvo aimed at multinational tax dodging.
Yet the Netherlands is on pace to maintain its attractiveness as a tax-friendly address for multinationals, according to several tax advisers to big companies. That's less likely for Luxembourg, they said.
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Guidance on the anti-inversions Notice 2014-52 is a top priority and the Internal Revenue Service is hoping to have regulations out by the end of the calendar year, a senior agency official said.

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As the OECDwraps up the first phase of its project to combat base erosion and profit shifting, the focus of the project needs to shift beyond raising revenue to growing economies, a U.S. Treasury official says. "We are still in a period of global austerity. And the guywith the money is the multinational," says Robert Stack, deputy assistant secretary for international tax affairswith Treasury,who has been a key figure in the BEPS negotiations.
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The U.K. government this summer published a consultation document proposing that large businesses be required to publish a "tax strategy," introducing a voluntary Code of Practice on taxation for large businesses and creating a "special measures" regime for companies HMRC regards as engaging in unacceptable tax avoidance. Dan Neidle of Clifford Chance asks how these proposals are likely towork,what they mean in practice for U.K. business andwhether the Code of Practicewill really be "voluntary."
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In an about-face, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said the United Stateswill participate in the effort to draft a multilateral instrument under action 15 of the OECD's base erosion and profit-shifting project to implement treaty-related BEPS measures.
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Although theworld's finance ministrieswere breathing a sigh of relief after the OECD's final base erosion and profit-shifting reportswere issued, a Treasury official said that a lot ofwork remains to be done regarding the treaty abuse provisions, including on the new language addressing the limitation on benefits in the model treaty.
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Edward Tanenbaum of Alston & Bird examines final IRS regulations (T.D. 9720) regarding the definition of "substantial business activities" in the context of inversions and how the rules have tightened as they evolved. Tanenbaum says the new regulations reflect the government's aggressive approach to closing down inversions.
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The beneficial tax programs and incentives offered by European nations for the development and use of intellectual property can allow multinational corporations to benefit simultaneously from relief for investment expenses aswell as significantly reduced income tax rates, according to a new study.

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Germany and Japan recently finished their negotiations on a new tax treaty between the two countries and initialed a draft agreement thatÔøΩamong other itemsÔøΩincludes new regulations on profit attribution in relation to permanent establishments stipulating use of the so-called Authorized OECD Approach.
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Proposed regulations attacking "aggressive" positions on outbound transfers of intangibles are aimed at abuses the government is seeing now, a Treasury official says. The rules significantly affect the technology and pharmaceutical industries, among a range of others. Brenda Zent, a special adviser in Treasury's Office of International Tax Counsel, says officials set an immediate effective date because "we view the regulations as shutting down an abuse."
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Treasury "got far along" a different route before reaching a decision to completely eliminate the foreign goodwill and going concern exception in the context of recognition of gain upon outbound transfers of intangibles, a Treasury official said October 20.
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A European Parliament panelwill attempt Oct. 26 to force major overhauls in European Union corporate tax policywhen it votes on a report calling for changes on a beefed-up Code of Conduct Group for Business Taxation, new transfer pricing rules,whistle-blower protections, tougher rules for enforcing tax rulings and an EU-wide definition of a tax haven.
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There is a global trend toward profit attribution principles that fall along a continuum between the arm's-length principle and formulary apportionment, said a panel of international tax experts.
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In news analysis, Lee A. Sheppard reports on an October 21 International Tax Institute luncheon in New York, atwhich an IRS official discussed recent partnership guidance addressing cross-border transfers: proposed and temporary section 956 regulations and a notice promising regulations under section 721(c).
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In the second of a series of updates on intangibles valuation and intellectual property (IP) assets, NERA principal Philip de Homont and affiliated consultant Alexander Voegele look at intangibles that allow companies to charge higher prices, and methods used to determine license fees.
For the ITR story, go here.

On October 14, the Luxembourg Government presented its 2016 Budget, containing certain tax measures to be introduced in 2015 and 2016. A progressive reduction of the Luxembourg corporate income tax rate has also been announced for 2017 but no further details have been provided.
For the ITR story, go here.

The executive branch of the Mexican government has submitted a tax reform proposal to Congress as part of the economic package prepared for 2016. The proposal honours the promise of the executive branch to not increase taxes during the rest of its term, and includes certain benefits, although it does increase the compliance burden for Mexican companies and, notably, includes country-by-country reporting (CbCR) obligations for Mexican entities in linewith BEPS.

For the ITR story, go here.

Politicians criticize "Benedict Arnold companies" that move abroad,where taxes are lower. But name-callingwon't bring them back. Lower tax rates might, and a new study shows the governmentwould benefit.
The nonpartisan Tax Foundation finds that because a lower tax ratewould bring jobs and investment back to these shores, the added employment and activitywould mean more revenues for Uncle Sam.

For the investors.com story, go here.

There is increasing public protest about the easewithwhich multinationals seem to play national tax systems to avoid paying tax.
The Organization for Economic Co-operation and Development's (OECD) 'Base Erosion and Profit Shifting' (BEPS) proposals thatwere published recently are the response. Despite the dry title, I thinkwe should be impressed by BEPS – it is transformative.
For the Forbes article, go here.

Effective dispute resolutionwill be the key to ensuring that the Organization for Economic Cooperation and Development's project on base erosion and profit shifting truly changes the international tax system, an officialwith the United States Council for International Business said.
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The OECD's final report on transfer pricing-related action items under its project to combat base erosion and profit shifting has resulted in a "fitter arm's length principle," an officialwith the organization told a transfer pricing conference in Toronto.
Andrew Hickman, head of the OECD's transfer pricing unit,was a keynote speaker Oct. 15 at the conference sponsored by Bloomberg BNA and Baker & McKenzie LLP.
For the DTR story, go here. (subscription required)

Starbucks Corp. and a Fiat Chrysler Automobiles NV unit are set to be first in the firing line as European Union regulators issue a series of rulings over tax breaks for global companies, including Apple Inc.
The EU may issue decisions against Starbucks and Fiat as soon as theweek of Oct. 19 following a two-year probe into how the companies may have gotten unfair tax treatment from Dutch and Luxembourg authorities, people familiarwith the cases said.
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The revised transfer pricing guidelines in the OECD's final BEPS project report on actions 8-10 remain somewhat ambiguous and lack consensus on attributing value to functions, but they could stillwork if effective dispute resolution methods are in place, Carol Doran Klein of the U.S. Council for International Business said October 15.
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One purpose of the OECD's final report on transfer pricingwas to illustrate thewide range of circumstances underwhich nonrecognition should not be applied, according to Andrew Hickman, head of the transfer pricing unit of the OECD's Centre for Tax Policy and Administration.
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The recent uptick in country-by-country reporting implementation activity should only accelerate further now that the final reports under the OECD's base erosion and profit-shifting project have been issued, and differences among regimes are already evident, according to Barbara Angus of EY'swashington office.
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The OECD's final base erosion and profit-shifting project report on revised transfer pricing guidelines has forged a fitter arm's-length principle, but government officials, policy leaders, and tax planners have an important role to play to keep the standard strong, said Andrew Hickman, head of the OECD's transfer pricing unit.
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The terminology in the OECD's final report on transfer pricing may in some cases distract from the underlying concepts, according to Brian Jenn, attorney-adviser, Treasury Office of International Tax Counsel.
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